The effectiveness of anti-leakage policies in the European Union: results for Austria

With the third trading period of the EU emissions trading scheme (EU ETS) starting in 2013, the system of allocating emission allowances will significantly change: In contrast to the previous two trading periods, auctioning of the allowances should now be the rule rather than the exception. Accompanying this policy change, concerns over competitiveness of energy intensive, trade exposed sectors as well as over limited environmental effectiveness via the channel of carbon leakage, have regained prominence. In this paper, we thus explore the impacts of potential EU policies to counter losses in international competitiveness and carbon leakage from the perspective of Austria. Based on numerical simulations with a computable general equilibrium model, we evaluate three policy options: an input subsidy for carbon allowances (thus reflecting the planned partially free allocation mechanism in the third EU ETS phase), a subsidy for domestic production, and an export rebate based on sectoral CO₂ costs. Our results show that each policy has the potential to support domestic production in exposed sectors relative to a full auctioning scenario and thus increase competitiveness. However, none is imperatively effective at reducing Austria’s net carbon emissions: while the carbon trade balance is improved and hence leakage declines, the tradability of emission permits within the EU ETS allows CO₂ emissions from Austria’s ETS output to increase. A cost benefit analysis indicates that the two policies promoting domestic output and exports are more cost effective than the CO₂ input subsidy.     

General equilibrium modelling of the direct and indirect economic impacts of water quality improvements in the Netherlands at national and river basin scale

The main objective of the study presented in this paper is to estimate the direct and indirect economic impacts of water quality policy scenarios in the Netherlands focusing on the reduction of emission levels of nutrients and a number of eco-toxicological substances. For this purpose, an Applied General Equilibrium (AGE) model consisting of 27 production sectors is extended to water through the inclusion of substitution elasticities between labour, capital and emissions to water in the sectors' production functions. The macro-economic costs of a 10, 20 and 50% reduction of the emission levels in the year 2000 of ten priority substances in the EU Water Framework Directive vary between 0.2 and 9.4% of Net National Income (NNI). A large share of the total economic costs are borne by important sources of pollution like commercial shipping, the chemical and metal industry. However, important spin-off effects due to adaptation take place in the tertiary service sector. Besides the estimation of the economy-wide impacts of water quality improvements, the novelty of the study presented here is found in the downscaling of national and sector results to river basin level and the estimation of shadow prices for water-polluting substances through the introduction of an emission permits market.     

行业视角下减排成本估算及减排路径研究

碳达峰碳中和是中国经济发展环境治理的战略目标,减排成本与减排路径是该战略实施中两大现实问题。基于行业视角,利用投入产出方法,对行业减排成本、技术减排效应及减排路径展开研究,基本结论如下：①行业减排成本差异大,整体减排成本逐年上升。在三个代表性年份行业最高与最低减排成本相差40-60倍,减排成本绝对差值在1500-3000$/t。在2000-2010年间, 32个行业减排成本均有不同程度的上升, 全社会整体减排成本上升了56.98%。②技术进步的减排贡献较大,部分行业技术减排有限。在产出固定假设下,2000-2010年技术进步实现累计减排57.09亿t,累计技术减排率达到47.88%；但在旅游、住宿餐饮等行业技术减排率为负,技术因素导致的排放不减反增。③行业减排路径应遵循从高碳到低碳的顺序。基于减排成本与技术减排两大因素的减排路径规划显示,优先和重点减排行业主要集中在能源生产供给、加工制造、交通运输、采矿及设备制造等高能耗高排放行业；可相对延后和非重点减排行业主要为食品烟草等传统加工制造业以及金融、房地产等现代服务业。     

The control of CO2 emissions and its economic impact: An AGE model for a german state

Since it is believed that CO₂ is responsible for 55% of the greenhouse effect, a CO₂ levy is now under consideration in several countries. For an assessment of the macroeconomic implications of an integrated energy and environmental policy we employ an applied general equilibrium model (AGE) since all sectors of an economy and all private households contribute to CO₂ emission. Our model is a temporary equilibrium model with capacity extension under adjustment costs and with abatement activities for SO₂ and NO_x emissions.The model of consumer behavior will result in a system of consumer demand functions for non-durables as well as for durable goods. The simulations show the cost of inefficiency in resource allocation if CO₂ taxes differ between industries and households. We finally present the marginal cost curve of CO₂ emission reduction.     

CUTTING CARBON EMISSIONS AT A PROFIT (PART II): IMPACTS ON U.S. COMPETITIVENESS AND JOBS

This article examines how an integrated least-cost implementation of the Kyoto Protocol in the United States would affect U.S. competitiveness and jobs. Drawing on previous work, the authors analyze integrated emission reduction strategies based on a $50/ton carbon tax (including border tax adjustments), a payroll tax cut, energy-productivity–oriented market reforms, and international flexibility mechanisms. This policy portfolios is compared to conventional approaches that omit market and fiscal reforms.
Input-output data are used to estimate the impact on export prices of goods and services produced in the United States. Similar data are used to translate changes in GDP and energy production into employment impacts in energy and nonenergy sectors. The costs of providing transitional assistance for workers in the coal industry are compared to the GDP benefits of a profitable Kyoto strategy.
The analysis shows that relative to purchasing international emission rights, productivity-raising domestic market, institutional, and fiscal reforms offer much broader advantages for tradE-exposed U.S. industries. Though allowance purchases alone increase export prices of U.S. manufactured goods and services, an integrated no-regrets strategy reduces export prices for the large majority of U.S. industries and limits the impact of climate protection policies on the few most energy-intensive basic materials industries to very small levels. Relative to the baseline, an integrated least-cost implementation of the Kyoto target increases economy-wide employment levels by several hundred thousand jobs in 2010.     

The economic impacts of drought on the economy of Iran: An integration of linear programming and macroeconometric modelling approaches

In this paper, we provide economy-wide estimates of the costs of drought in the cropping sector of the Iranian economy, using a linear programming model to estimate the direct costs on agriculture, and a macroeconometric model to trace the indirect impacts on the rest of the economy. The results indicate that a severe drought such as the one that occurred in the crop year 1999-2000 imposes a direct cost of 1605 million USD, equivalent to 30.3% of the total value added of the cropping sector in Iran. This, in turn, leads to a 12.7% reduction in the value added of other agricultural sub-sectors (livestock, fisheries and forestry). In the rest of the economy, the manufacturing and service sectors experience value added declines of 7.8 and 3.7%, respectively. In addition, there is a substantial decrease in investment in the agricultural, manufacturing and service sectors. Thus, such a drought reduces overall GDP by about 4.4%, and it would also result in decreased non-oil exports, increased food imports, and a rise in inflation. The results of some drought mitigation simulations are reported in brief. Such estimates strengthen the case for increased attention to drought strategies and management in agriculture in Iran and elsewhere.     

Addressing leakage in the EU ETS: Border adjustment or output-based allocation?

The EU ETS has been criticised for threatening the competitiveness of European industry and generating carbon leakage, i.e. increasing foreign greenhouse gas emissions. Two main options have been put forward to tackle these concerns: border adjustments and output-based allocation, i.e. allocation of free allowances in proportion to current production. We compare various configurations of these two options, as well as a scenario with full auctioning and no border adjustment. Against this background, we develop a model of the main sectors covered by the EU ETS: electricity, steel, cement and aluminium. We conclude that the most efficient way to tackle leakage is auctioning with border adjustment, which generally induces a negative leakage (a spillover). This holds even if the border adjustment does not include indirect emissions, if it is based on EU (rather than foreign) specific emissions, or (for some values of the parameters) if it covers only imports. Another relatively efficient policy is to combine auctioning in the electricity sector and output-based allocation in exposed industries, especially if free allowances are given both for direct and indirect emissions, i.e. those generated by the generation of the electricity consumed. Although output-based allocation is generally less effective than border adjustment to tackle leakage, it is more effective to mitigate production losses in the sectors affected by the ETS, which may ease climate policy adoption.     

Strategic partitioning of emission allowances under the EU Emission Trading Scheme

The EU Emission Trading Scheme (ETS) is breaking new ground in the experience with emission trading regimes across multiple jurisdictions. Since the EU ETS covers only some industries, it implies a hybrid emission control scheme where EU member states must apply complementary domestic emissions regulation for the non-trading sectors of their economies in order to comply with their national emission reduction targets. The EU ETS thus opens up for strategic partitioning of national emissions budgets by the member states between trading and non-trading sectors. In this paper we examine the potential effects of such strategic behavior on compliance cost and emissions prices. We show that concerns on efficiency losses from strategic partitioning are misplaced. In turn, our analysis implicitly indicates significant political economy forces behind EU climate policy, as both cost-effective and strategically motivated partitioning of national emission budgets are far off from the actual break-down between trading and non-trading sectors.     

FDI对中国制造业污染排放影响的经验分析

FDI主要流入制造业中相对清洁的部门,从直接效应来看,FDI流入并没引起制造业污染排放的增加,反而减少了制造业的污染排放.基于投入产出的计算结果,FDI对中国制造业污染排放的间接拉动效应存在行业差异性,且FDI的间接效应只引起制造业中二氧化硫排放的上升,而对工业废水和工业烟尘的排放影响不显著.制造业各行业的能源消耗和科技投入也是造成污染排放增加的重要原因.     

Transition of the Chinese Economy in the Face of Deep Greenhouse Gas Emissions Cuts in the Future

China joined the Paris Agreement, and the global 2°C and 1.5°C warming targets will be supported by China. In order to achieve these targets, China's CO₂ emissions need to be cut deeply by 2050. The present paper presents studies from the integrated policy assessment model for China (IPAC) team about the impact on China's economic development of deep cuts in greenhouse gas (GHG) emissions, in order to realize the Paris climate change targets. With the requirement of deep cuts in GHG emissions in China, China's economic development will also be impacted in moving toward a low‐carbon or zero‐carbon emission‐based economy by 2050. This means the Chinese economy needs a strong transition over the next three decades, a relatively short time. All sectors in the economy need to seek ways to reduce GHG emissions, and this could change activities, industry processes and technologies in order to make the deep cuts in GHG emissions happen. This is the meaning of the economic transition toward to a low‐carbon economy. The findings of the present paper include: a significant transition in the energy supply sector; a high rate of electrification in all end‐use sectors; and a technology transition in the transport sector. Transitions will also occur in the traditional industrial sectors, including steel making, cement manufacture, and the chemical sector. The availability of low‐cost renewable energy could change the allocation of industries, which could potentially have a strong impact on regional economic development. Deep cuts in CO₂ emissions in China need not be a burden for economic development, as the IPAC results show there will be a more than 1.5% increase of gross domestic product by 2050 in the deep cut scenario compared with the baseline scenario.     

Induced technological change and the attractiveness of CO2 abatement policies

This paper investigates the significance of induced technological change (ITC) for the attractiveness of CO₂ abatement policies. We use analytical and numerical general equilibrium models in which technological change results from profit-maximizing investments in R&D. We show that carbon abatement policies have very different impacts on R&D across industries, and do not necessarily raise the economy-wide rate of technological progress. Focusing only on the sectors with positive R&D impacts can lead to substantial underassessment of the GDP costs of CO₂ abatement policies. The presence of ITC implies lower costs of achieving a given abatement target, but it implies higher gross costs (costs before netting out environment-related benefits) of a given carbon tax. Gross costs depend importantly on the efficiency of R&D markets prior to the introduction of CO₂ policies.     

Industrial loans and market structure

Based on the observation that financing is one of the main obstacles to create new firms, this paper deals with the interactions between the market structure of both the banking sector and the borrowing industries. We consider that firms’ installation costs are financed by means of industrial loans from specialized banks. With endogenous entry in banking activity as well as in the borrowing industry, we find that a natural oligopoly emerges in both sectors if the entry cost in the industrial sector is small enough, relative to the banks’ entry cost.     

Hot air for sale: a quantitative assessment of Russia’s near-term climate policy options

Since January 2005 the European Union has launched an EU-internal emissions trading scheme (EU ETS) for emission-intensive installations as the central pillar to comply with the Kyoto Protocol. The EU ETS will be linked to a Kyoto emissions market where greenhouse gas emission allowances of signatory Kyoto countries can be traded. In this paper we investigate the implications of Russian market power for environmental effectiveness and regional compliance costs to the Kyoto Protocol taking into account potential linkages between the Kyoto emissions market and the EU ETS. We find that Russia may have incentives to join the EU ETS as long as the latter remains relatively separated from the Kyoto international emissions market. In this case, Russia can exert monopolistic price discrimination between two separated markets thereby maximizing revenues from hot air sales. The EU will be able to substantially reduce compliance costs if it does not restrain itself to EU-internal emission regulation schemes. However, part of the gains from extra-EU emissions trading will come at the expense of environmental effectiveness as (more) hot air will be drawn in.      

Average-cost Pricing, Increasing Returns, and Optimal Output: Comparing Home and Market Production

We employ a model with both market production and home production to show that, ignoring administrative costs and indirect effects (such as rent-seeking), even if both the home and the market sectors have the condition of increasing returns and there are no pre-existing taxes, it is still efficient to tax the home sector to finance a subsidy on the market sector to offset the under-production of the latter due to the failure of price-taking consumers to take account of the effects of higher consumption in reducing the average costs and hence prices, through increasing returns or the publicness nature of fixed costs. Within market production, it is efficient to subsidise more the sector with a higher fixed cost, a lower elasticity of substitution between goods (higher value of diversity), and a lower degree of importance in preference, which all increase the degree of increasing returns.     

Fossil fuel subsidies and environmental constraints

Fossil fuel subsidies are applied in many countries for different policy reasons such as maintaining jobs in fossil fuel sectors, securing national energy supply or lowering the energy costs of selected industries to strengthen competitiveness. The current economic costs of fossil fuel subsidy policies can be substantially increased by future environmental constraints. We illustrate this point in the framework of a general equilibrium analysis for Germany where we quantify the economic costs of alternative hard coal subsidy policies at different CO₂ reduction levels. Our calculations show that German hard coal subsidies as a means of retaining jobs can get very expensive with additional specific costs of up to annual 70 000 DM per job for a given CO₂ reduction target of 35%. Though the empirical analysis is focused on Germany the general conclusion that current subsidy policies of fossil fuels must be fundamentally reconsidered in view of forthcoming environmental constraints is also relevant for other countries.     

Energy conservation,emission reduction and win–win development of China’s industry: 2013–2050 – MDI analysis framework based on directional distance function

As the biggest developing country, China faces the heavy pressure of energy conservation and emission reduction (ECER). China’s industry takes first place in energy consumption and pollution emission among the industrial entities. How to get rid of China’s industrial stagnant growth under the restriction of resources and environment, and find out the optimal path between ECER and industrial development is the main task of this study. The article adopts the historical data of China’s industry from 2003 to 2012, establishes a managerial disposability intensity analysis framework based on the directional distance function, and designs four energy conservation scenarios and nine CO₂ emission paths for a total of 36 kinds of alternative policy combinations to predict the win–win development and find the optimal path of industrial ECER from 2013 to 2050. Research shows that on the whole, industry will fail to achieve a win–win development in the future, while 6% growth rate of industrial output, 2.8% growth rate of energy consumption, and the peak of CO₂ in 2040 is the most optimum path. At the same time, the feedbacks of ECER constraints on specific industrial sectors are different, there are 16 industrial sectors that can achieve win–win development in the future.     

The effect of ESCOs on carbon dioxide emissions

Proponents of energy service companies (ESCOs) argue that these firms provide a crucial instrument for delivering improved energy efficiency in public and private sectors, thus contributing to carbon dioxide (CO₂) emission reduction around the world. Do ESCOs reduce CO₂ emissions? To answer this question, we develop an estimating equation, which approximates the IPAT model, from a simple model of production. We estimate a dynamic panel of 129 countries over the period 1980–2007 to show that the ESCOs effectively reduce CO₂ emissions and that this effect increases over time. These findings also prove robust to the inclusion of a set of control variables, different dates of the first ESCO and the Kyoto Protocol. Finally, we discuss energy policy implications.     

Climate policy in Western Europe and avoided costs of air pollution control

Abatement of CO₂ emissions will be accompanied by reduced air pollutant emissions such as particulate matter (PM), SO₂, and NO_x. This, in turn, will reduce the need for end of pipe (EOP) pollution control technologies to meet future air quality targets. This dynamic could put more stringent air quality goals within reach, and increase the political feasibility of climate policy. This paper presents a CGE model that has been modified to include the emissions and EOP abatement of PM, SO₂, and NO_x from stationary sources in the EU-17. Emissions of pollutants are modeled as fixed-factor complementary inputs to their associated source. Abatement in each sector is modeled as a substitution between the pollutants and discrete abatement technologies, each of which is sector-specific and characterized by a marginal abatement cost and technical capacity constraint. Scenarios are run to 2020, to assess the costs and co-benefits of simultaneous air quality and climate policies. We find that under the Kyoto Protocol in 2010, the welfare cost of pollution control is reduced by 16% compared to the baseline, effectively offsetting the cost of CO₂ abatement by 15%. The co-benefit results depend heavily on policy choices, and their magnitude relative to total costs is likely to decline as greenhouse targets become more ambitious. In our scenarios, pollution control cost savings range from 1.3 to 20% in 2020, yielding a climate cost offset range of 0.2 to 3.9%. The CO₂ credit imports allowed by the EU via the Clean Development Mechanism (CDM) offer a total savings of $9.7bn in 2020, but only need to be compensated by an additional $0.3–0.4bn in domestic pollution control from stationary sources.     

Input-output subsystems and pollution: An application to the service sector and CO2 emissions in Spain

The analysis of input-output subsystems provides a useful tool for studying the productive structure of the different sectors of an economy. In this paper we develop this analysis to the study of the CO₂ emissions associated to the group of branches of the service sector. The decomposition of the total production of the services subsystem allows us to decompose the CO₂ emissions into five different components (own, demand volume, feed-back, internal and spill over components). From the results obtained, we can highlight the different roles played by the different branches of services. Transport activities are the services with the highest level of the direct emissions generated in the production of the sector. These activities are required by the other sectors of the economy to a greater degree than they are for their own final demand. Therefore, the production sold to other sectors causes more emissions than its own final demand. However, in the case of other service activities, direct and indirect emissions related to final demand are much more important, due to the strong pull effect of service activities on other activities of the economy. In this respect, Wholesale and retail trade, Hotels and restaurants, Real estate, renting and business activities, and Public administration services should be highlighted. These services receive scarce attention in the design of policies aimed at reducing emissions, but are notably responsible for the major increase in emissions experienced in recent years.     

A Structure Decomposition Analysis of China’s Production-Source CO<Subscript>2</Subscript> Emission: 1992–2002

This paper provides an empirical analysis of the relative impacts of various factors on CO₂ emissions from production of goods and services in China during two consecutive periods of 1992–1997 and 1997–2002. Results show that, on the positive side, level of final demand for goods and services was the main reason for the increase of production-source CO₂ emission, while structure of net export has similar positive effect during the first period of 1992–1997. On the negative side, technology factors remains as the main factors reducing emissions. The level of net export played some role in the first period, but the effects were seen in the second period from energy intensity, fuel mix and input mix. The results suggest that economic structure be focused as an important factor for CO₂ emission reduction, with construction and transport as two key industries to lower carbon emission.